EU banks avoid overdose on ECB wonder-drug 29 Feb 2012 Demand for the central bank’s second fix of cheap three-year loans was a chunky 530 bln euros. But the beneficiaries include smaller banks keeping themselves afloat, not just big lenders recklessly bingeing. While the high take up carries risks, it is the lesser of two evils.
Markets might yawn at second ECB cheap-money fix 28 Feb 2012 The ECB’s first three-year liquidity facility in December sparked a rally across markets. The second may not have the same impact. Those hoping for a massive injection of cheap money may be disappointed. And expectations of further ECB long-dated funds look premature, at least for now.
Spain’s regions still threaten fiscal turnaround 28 Feb 2012 The central government largely met its deficit targets last year, but the country’s regions accounted for two-thirds of an overall miss, with total deficit at 8.5 pct of GDP against a 6 pct target. The market seems sanguine. This could change if Madrid can’t discipline the provinces.
Hugo Dixon: How to pep up European growth 27 Feb 2012 In the short run, the priority is to avoid an austerity spiral. In the long run, structural reform and a drive to create a dynamic single market are the answers. Leaders, meeting at the latest summit this week, should link the two.
Shadow bank rush leaves periphery behind 24 Feb 2012 European banks are lending less to smaller companies, creating a big opportunity for credit funds, particularly in Europe’s core. But this is still a niche product and growth is being held back in the periphery by hostile laws, high costs and lenders’ economic worries.
Greek banks head for supranationalisation 23 Feb 2012 The country’s lenders will get a 50 billion euro capital injection as part of the latest bailout. Normally this would mean nationalisation. But Athens’ saviours are putting in place buffers to stop Greek politicians meddling. While sensible, this could cause friction.
Europe picks up as Commission predicts recession 23 Feb 2012 The European Commission is belatedly forecasting recession – but data may now be improving outside the euro periphery. Germany’s Ifo survey has risen for a fourth month and UK export orders have leapt. Global growth and inflation could be firmer than expected.
Greek rescuers rise haltingly to historic occasion 21 Feb 2012 The latest deal with Athens falls short, like all its predecessors. But the inadequacies should not be seen as a European failure. The world is rising to the most profound challenge of modern finance. The response may be slow, but it is authoritative and just.
Greek deal makes best of a bad job 21 Feb 2012 It would have been better to have bitten the bullet earlier and Athens is still unlikely to pull through without further economic and political shocks. But the debt restructuring cum bailout keeps the pressure on Greece and has probably defused a wider blow-up.
ECB Greek loss dodge heralds end of bond buying 17 Feb 2012 The ECB will avoid losses on Greek bonds through a legal manoeuvre. Such special treatment will not please the bondholders asked to take losses on their Greek debt. That’s bad for other countries whose debt the ECB owns. And it will make bond buying difficult in the future.
Delay gives Europe better grip in Greco wrestling 16 Feb 2012 Euro zone governments are in a bind; how can they give Greece a second bailout if the country’s politicians reject reforms after the April parliamentary elections? The best bet may be to delay.
Two-speed euro zone risks permanent divide 16 Feb 2012 The latest growth figures show France and Germany doing better than expected, and the periphery falling further behind. The separation could become entrenched. The laggards need to speed up, but labour cost and trade data show their competitiveness isn’t improving.
Chaos in Greece is not just a Greek problem 13 Feb 2012 Investors may take a sanguine view of the euro zone crisis now that the Greek parliament has approved the troika’s latest, toughest austerity plan. But while contagion fears are rightly receding, disorder in Athens would bring financial and political pain for all of Europe.
IMF offers best way for China to save Europe 13 Feb 2012 Beijing will say it wants to see Europe survive at this week’s joint summit. Lending directly isn’t the way. China can do better by pitching into a $1 trillion IMF-led rescue, with less chance of losses, less nationalist ire, and over time, a bigger seat at the IMF’s top table.
IMF takes too euro-centric view of China 7 Feb 2012 The Fund says a bad slowdown in the euro zone would cut China’s GDP growth in half. Not likely, since China relies much less on exports than in 2008. The IMF is also wrong about Beijing’s appetite for another big stimulus programme. China’s real risks are internal, not external.
Rich countries need to escape institutional traps 3 Feb 2012 Greece could balance its trade and budget without becoming much poorer. Spain could cut unemployment and become richer in the process. The U.S. could rein in health care expense. All that is required is institutional reform. Sadly, it seems to take more than crisis to get that.
Europe can’t force Greece into never-default land 1 Feb 2012 Germany would like to prevent Greece from ever defaulting, by forcing it to dedicate its resources to service its debt first. This looks both legally unenforceable and politically untenable. The reality is that Greece will default if it wants to.
Euro zone ill-suited for long-term economic task 31 Jan 2012 Yesterday’s problem - fiscal insouciance - has been addressed. Now euro zone leaders need to find ways to boost their economies, and keep Greece and Portugal from turning into economic deserts. That calls for long-term thinking from governments obsessed by the next election.
Hugo Dixon: Three bad fairies at euro feast 30 Jan 2012 The Super Mario Bros - Draghi and Monti - have started well; and a deal for building a bigger firewall to stop contagion as well as a short-term fix for Greece may be in the works. But new worries are emerging about Spain and France - and of course Greece is still a mess.
EU must learn to cope with new German leadership 30 Jan 2012 Berlin will get the euro fiscal treaty it wants, and even Nicolas Sarkozy is using Germany as an example for French reforms. The euro zone has to get used to the new regime. The shock over the tough German line on Greece shows adjustments are needed - from both sides.